So, you signed and accepted a Purchase Contract and you’re off to celebrate! Not so fast, my friend – your sale isn’t final until the last condition is waived. Here are six reasons why real estate sales fall apart:
#1 Mortgage Approval Problems
Even buyers who take the time to get pre-approved can be declined for a mortgage. Some “pre-approvals” are just loosely calculated pre-qualifications. The lender hasn’t verified the buyer’s income or confirmed that they have a down payment. They’ve just run some numbers and given them an idea of what they could qualify for. And some buyers just do this themselves with an online calculator.
With a pre-approval, buyers produce proof of income and down payment. The lender checks their credit history and ensures they meet all the qualifying criteria. The final outstanding piece of information standing in the way of an approval is the property (i.e., an accepted offer to purchase).
While a proper pre-approval is better, even pre-approved buyers are sometimes faced with a declined application. This could be due to changing mortgage rules, down payment funds not coming through, or last-minute surprises on the buyer’s credit report. (If you’re a buyer reading this, PLEASE don’t apply for any new credit until AFTER you’ve moved in!)
#2 Low Appraised Values
The bank will always verify a property is worth enough to recoup the mortgage amount if the buyer cannot pay. They will either use an automated value based on a database of property values or they will send a property appraiser to the home to manually estimate the value.
You might be excited that your home sold near or over asking price. But if the bank can’t substantiate the value, the buyer must either come up with a larger down payment or come back to you for a price reduction. When all parties can’t come to an agreement, real estate sales fall apart the homes go back on the market.
#3 Hard-to-Sell Properties
Many buyers worry about ending up homeless and start looking for a new home before they list their current one. This is great for them, but not so much for you as the seller.
Showing requests slow down (or even stop) when your home is tied up with an accepted offer. It can sometimes take weeks or even months for a home to sell, meaning you could be missing out on other offers.
Once your buyers accept an offer, you’re not in the clear yet! You need to wait until all the conditions on the sale of your buyers’ home are waived before your home is sold. And what if their offer is contingent on the sale of a third home? The chain could theoretically go on endlessly, and if one of the properties in the chain doesn’t sell all of the homes go back on the market.
Contract chains like this can get complicated – you’ll want an experienced agent on your side in this situation.
#4 Home Inspection Issues
Buyers want to ensure they’re getting good value for their money, so most purchase contracts include a property inspection condition. A professional property inspector will look at the major components of your home (roof, foundation, mechanical systems) and provide the buyer with a report that outlines potential issues and an idea of the time before major components will need to be replaced. If buyers are surprised by the scope of the repairs or maintenance required, they might ask for a price reduction or even collapse the deal.
You can mitigate this risk by completing a pre-listing home inspection. An inspector inspects your house and provide you with a report, just like he does with buyers. With this information, you can address any issues before your home is listed for sale and avoid surprises. And if you leave the inspection out for buyers to see (and potentially purchase from you for a reduced cost), you may even receive an offer without a property inspection condition!
#5 Changes of Heart
Things can change in peoples’ lives, even during the short time between when an offer is written and the final condition date. Sometimes one of the parties to a Purchase Contract decides they no longer want to proceed. Whether it’s for a legal reason (i.e., a condition on the contract that cannot be met) or not (like they just changed their minds), the result is a home that’s no longer sold.
#6 Bad Agents
Real estate contracts are complicated. Experienced agents know how to write terms and conditions that are clear and enforceable. They follow up with all parties to ensure everyone is working to fulfill their obligations on time. They make sure the paperwork gets to the lawyers and take care of any unexpected issues that arise. Without monitoring, someone could easily miss a deadline or not complete a task required by the contract – and the estate sale falls apart.
What happens when real estate sales fall apart?
If a Purchase Contract is collapsing for a legal reason – like the buyer cannot obtain financing and there is a financing condition on the Contract – the person will sign a “Non-Waiver” to notify you. Your home will go back on the market and the real estate brokerage will return the buyer’s deposit.
If one of the parties just refuses to complete the Contract, the sale will not go through. There may be legal remedies (like forfeiture of the deposit and/or further legal action) available to the other party. You will need to consult with an experienced real estate lawyer for advice.
Hit me up with your questions about real estate. I’ve been a real estate agent for 15 years and I’ve helped hundreds of families buy and sell their homes. There’s not too much I haven’t seen!
Don’t worry – no salesy pressure here! Just answers. Send me a message or call/text me at 403-795-4486.